Insurers set to increase outsourcing, survey finds.
Major insurers are set to increase their outsourcing operations in 2008, according to a recent survey carried out by law firm Pinsent Masons.
Insurers were confident that their outsourcing arrangements were robust enough to satisfy the FSA, the survey found. The regulator introduced new guidelines on outsourcing last year.
The survey also suggested that long-term outsourcing arrangements were still seen as an important means of saving money, despite regulatory concerns and the impact of VAT changes over the next three to five years. This stems from the European Commission’s proposals to modernise the VAT regime for insurance.
The survey revealed that 82% of respondents did not find regulations on outsourcing unduly restrictive, with half of those respondents finding the level of regulation about right.
Key areas where insurers were looking to outsource were policy administration, IT and claims.
The survey of in-house lawyers in the insurance sector was carried out at a recent seminar hosted by Pinsent Masons.
Alexis Roberts, insurance partner at Pinsent Masons, said: “The good thing about the FSA’s systems and controls regime is that generally it aligns with good commercial practice. The areas of current FSA focus are offshoring and over-dependence on IT systems, which can also give rise to greater commercial risk, because effective controls can be harder to achieve.
“Those are the areas where strong contractual arrangements and regular monitoring will be particularly important for insurers.”
The survey follows a report from sourcing data and advisory firm TPI predicting that the global market for outsourcing will grow by almost a tenth in 2008.
The development will be driven by the tough economic climate, as companies look to drive efficiency savings in the wake of the credit crunch, it said in the report published last week.